Forever 21 Files for Bankruptcy Protection to Recover Business

Category: Business


Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. fashionable / ˈfæʃ ə nə bəl / (adj) – describing something that is popular and generally considered stylish

    Bell bottom jeans were so fashionable when I was in high school that everybody wore them.

  2. keep pace with (something) / kip peɪs wɪθ / (phrasal) – to grow or progress at the same rate as something

    The company hired more experienced IT professionals to keep pace with its competitors’ technological advancement.

  3. rapid / ˈræp ɪd / (adj) – happening very fast

    The rapid advancement of technology causes many phones and devices to get outdated so quickly.

  4. conscious / ˈkɒn ʃəs / (adj) – having great awareness and care about something

    People have become more conscious of the food they eat.

  5. deal a blow / dil ə bloʊ / (idiom) – to cause harm or a disadvantage to someone or something

    The increasing popularity of electronic books dealt a blow to several publications’ sales.


Read the text below.

American fashion giant Forever 21 files for bankruptcy protection as it struggles to maintain its operations.

The clothing chain, known for its affordable and fashionable products, announced the decision on its official website in late September.

The company has been having difficulty to keep pace with the rapid growth of e-commerce and change in consumer demands, causing its sales to suffer. Recently, Forever 21’s target market, which is dominated by teenagers and millennials, started to turn to online shopping.

Additionally, many consumers are becoming conscious of the materials used in the products they purchase, preferring brands that do not harm the environment. According to a retail research firm founder, Forever 21’s brand does not particularly stand for that advocacy.

These challenges dealt a serious blow to Forever 21, which owns roughly 800 large brick-and-mortar stores worldwide. Based on court documents, the company can no longer afford its rent amounting to $450 million a year.

The brand revealed plans to close as many as 178 of its US stores. Most of its international operations will also gradually come to an end, especially in Asia and Europe. Despite this, business will continue as usual for its branches in Latin America and Mexico.

The company says the bankruptcy filing is necessary for the future of the business. While under bankruptcy protection, the company’s debts are frozen. The business also obtained $275 million from its lender JP Morgan Chase and $75 million from global finance and investment firm TPG Sixth Street Partners. With a sum of $350 million from financers, the firm can continue its operations and have the chance to become profitable again.

Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

• Based on the challenges that Forever 21 identified (i.e. online competitors, environmental consciousness of consumers), what can the company do to become profitable again? Discuss.
• Aside from those mentioned above, what do you think are the challenges that fashion companies face? Discuss.

Discussion B

• How can filing for bankruptcy protection affect the image of a business? Discuss.
• Which do you think is better for a failing business, to borrow money to continue operations, or to sell all the company’s assets and close down completely? Why?